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Asset Pricing Models: Further Tests

Published online by Cambridge University Press:  06 April 2009

George Foster
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Extract

The capital asset pricing model specifies that relative risk is a sufficient descriptor of security risk. This result holds under both the Sharpe-Lintner version,

and the more general Black version of the model,

where

= expected rate of return on asset i,

Rf = riskless rate of interest,

= expected return on the market portfolio,

= expected return on any “zero-beta” asset or portfolio of such assests, and

= relative risk of asset i in the market portfolio of assests.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 13 , Issue 1 , March 1978 , pp. 39 - 53
Copyright
Copyright © School of Business Administration, University of Washington 1978

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References

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